In short: News mention ("Stocks I'm Watching"): up more than 7% premarket on the reported settlement talks that could clear Paramount's $81 billion takeover.
In short: The flagship arb, traded around rather than held — and a possible re-add. "The FCC approved Paramount's foreign investment backing… it just makes it one step closer for this deal to close." The spread path: "we were adding to this arb spread at about 20%… then it tightened to like seven, now it's back at 10. So, if it widens past 10, we might add a little bit more after we sold." The method, stated: "when they widen out a lot, you can buy them, when they shrink, you sell them and then you can buy them again. You can do it multiple times. We've been in and out of Warner Brothers–Paramount like three times." (The transcript's "Peacock" is Paramount; "after we sold" implies the position described on SEP-13 as "the only one… we own in size" was reduced.)
Paramount has agreed to buy Warner Bros. Discovery for cash. Until the deal closes, Warner's shares trade below the offer price; the gap (the "spread") is the reward for waiting and for the risk the deal fails. This week the US communications regulator approved the foreign money helping finance Paramount's bid — another hurdle cleared.
Singh treats this spread as something to trade repeatedly. He bought when the gap was about 20%, sold as it shrank to about 7%, and has done the round trip about three times. It has now widened back to 10%, and he says he may buy some again if it widens further.
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In short: The one large-cap arb held in size, now mostly collected. "With respect to large-cap merger arbitrage and special situations, the only one of these that we own in size is this Warner Brothers–Paramount, which has compressed from over 20%. … Most of our merger arb exposure is in much smaller names." No new catalyst is discussed on the call; the position is carried as the largest remaining large-cap spread exposure while the book's new money goes to small-cap situations.
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In short: The flagship arb has now compressed out of the top spot — which is itself the update. "The largest spread right now, given the compression in Warner Brothers-Paramount, which would have been long, is NSC UNP." Two weeks ago WBD was the widest spread in the book at 20% narrowing to 7%; it has now tightened enough that the rail deal — where the deck flags "fundamental headwinds and growing republican opposition to the deal" — carries the widest remaining spread on the screen. The related item still open on the calendar is the WSJ's report of "industry skepticism around Paramount's commitment to distribute 30 films per year."
Warner Bros. Discovery has been the flagship position in the merger-arbitrage book for months, bought when the gap between the market price and the agreed takeover price by Paramount Skydance was around 20%. That gap has been closing steadily as regulatory objections have been worked through, and this week it closed enough that Warner is no longer the widest spread on the screen.
The way Singh mentions it is itself the update: asked which deal now offers the most, he answers "the largest spread right now, given the compression in Warner Brothers-Paramount, which would have been long, is NSC UNP" — the contested Norfolk Southern / Union Pacific railroad merger. In arbitrage, a narrowing spread is a position doing its job: most of the return has already been collected and the remaining reward for holding it is small.
Still open in the background: the Wall Street Journal reports scepticism about Paramount's public promise to release 30 films a year, which is one of the commitments regulators and cinema chains have been weighing.
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In short: Still the flagship arb, and now nearly done: "you can see the biggest arb spreads. Warner Brothers is now number two from number one. We're long that from a 20% arb spread. It's now only 7%." The week cut both ways. Positive: WBD "rose to their highest level since February on Monday" on reports the California AG and Paramount would hold settlement talks, and traded firm again on a Bloomberg report that Paramount is weighing structural remedies — separate distribution agreements with cable operators, having calculated and then rejected selling HGTV and the Food Network. Negative: AG Rob Bonta called the meeting off, "citing allegations that the company's leadership has leaked information and negotiated in bad faith… 'Not only did Paramount leak the alleged substance of settlement discussions, but they misrepresented these discussions, demonstrating a lack of good faith.'" And per the WSJ, state AGs "were preparing to ask Paramount Skydance to divest some cable channels as well as commit to keeping its movie studio separate from Warner Brothers." There is no set date for the talks to resume.
This remains a merger arbitrage. Paramount Skydance has agreed to buy Warner Bros. Discovery; the shares trade below the agreed price because the deal might be blocked; and that gap narrows as completion becomes more likely. Singh was buying when the gap was 20%. "It's now only 7%" — most of the money has been made.
The week gave a positive and a negative. The positive is that Paramount is visibly working on remedies: it looked at selling Warner channels such as HGTV and the Food Network, decided it would not have to, and is instead considering offering to negotiate separate distribution deals with cable operators for different parts of its television business. Offering regulators a structural fix is what settlements are made of.
The negative is temperament. California's attorney general cancelled Monday's scheduled settlement meeting, accusing Paramount's leadership of leaking the substance of the talks and misrepresenting them — "demonstrating a lack of good faith." No new date has been set. And the states are reportedly preparing to demand that Paramount sell some cable channels and keep its film studio separate from Warner's, which is more than Paramount has so far offered.
For a position already 13 points into a 20-point spread, the shape of the remaining bet has changed. What is left is compensation for a narrower, more legal set of risks — and the counterparty just made the negotiation harder.
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In short: The flagship arb, now most of the way home: "we were adding when it was a 20% spread, now it's only 8.8 spread at the end of the week… that's been a win for us on the special sits front." The catalyst was Cinema United — which had formally opposed the merger with Paramount Skydance — reversing course and joining the three largest theatre chains in support, in exchange for commitments on wide-release film counts, no increase in exhibition fees, and continued access to the combined Paramount and Warner libraries. California AG Rob Bonta still says "the proposed merger breaks the law" and worries about job losses and wage cuts, "but the market's looking past that given all the movie theaters are now in support." Two more legs on the downside case: the $7 million per day ticking fee payable by Paramount to WBD shareholders if the deal misses October 1st — "which only helps their downside case" — and Paramount's demand that the 12-state antitrust coalition post a $1.9 billion bond to cover it, which California's AG rejected as Paramount's own sophisticated risk to bear.
This is a merger arbitrage: Paramount Skydance has agreed to buy Warner Bros. Discovery, and the WBD shares trade below the agreed price because the deal might not complete. That gap is the "spread," and it closes as the deal becomes more certain. Singh was buying when the gap was about 20%; it is now 8.8% — most of the money has already been made.
What changed this week was the cinema industry. Cinema United, the trade body for theatre owners, had opposed the merger, fearing a combined studio would release fewer films and charge exhibitors more. It reversed and joined the three biggest chains in support, after extracting promises: keep or expand the number of films given full cinema releases, do not raise the fees theatres pay, and keep both studios' film libraries available. Regulators find it far harder to block a merger when the industry supposedly being harmed says it is fine.
Two other details protect the downside. Paramount agreed to pay WBD shareholders $7 million a day if the deal is not completed by October 1 — a "ticking fee," which means delay pays Warner holders rather than punishing them. And Paramount has asked a court to make the twelve states suing to block the deal post a $1.9 billion bond covering that fee, which would make the lawsuit expensive to continue. California's attorney general still says the merger is illegal and is refusing, but as Singh puts it, the market is looking past him.
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In short: "We're long the Warner Brothers WBD spread, which is one of the big merger arb spreads in the market" — an all-cash Paramount Skydance deal, "about a $5 spread, so 19%," which he thinks clears antitrust with the close "probably next year."
Merger arbitrage: when one company agrees to buy another for cash, the target's shares usually trade a little below the agreed price, because the deal might not close. You buy the target and collect that gap when it does close.
Here Paramount Skydance is buying Warner Bros. Discovery for cash, and the gap is about $5 a share — roughly 19%. Singh thinks it clears antitrust and closes next year. Because the payoff depends on regulators rather than the stock market, this kind of position holds up when the index falls — which is exactly why he wants it heading into an uncertain November.
5:30And then we're long the Warner Brothers WBD spread, which is one of the big merger arb spreads in the market. So, that's Warner Brothers / Paramount Skydance. So, that's a cash deal. It was about a $5 spread, so 19%. And we think that it's going to go through antitrust; the deal probably will close next year.
In short: The flagship arb, still held and tightening: "the biggest spreads — we saw Warner Brothers tighten last week. We have a position in Warner Brothers… It did rally from like 26 to 28." Two legs improved. Former California AG Xavier Becerra, now a Democratic candidate for governor, said a settlement "would be the best outcome" in the state AG's suit to block the $110B Paramount Skydance / WBD merger. And Paramount pledged 30 films a year to AMC and Cineworld's Regal on three-year contracts with 45-day theatrical exclusivity and no streaming for 90 days — "this is giving theaters more power, and is going to help the anti-trust approval and the eventual settlement." Net effect: "that spread has tightened from about 20% down to 15%." Deck pages 3-4.
Paramount Skydance has agreed to buy Warner Bros. Discovery for $110 billion, and California's attorney general is suing to block it. Singh owns Warner shares at a discount to the agreed price — the classic merger-arbitrage bet that the deal survives.
Two things happened this week that make survival more likely. First, the former California attorney general — now running for governor, so a plausible future decision-maker — said publicly that settling would be the best outcome for the industry and the state. Second, Paramount removed the cinema chains' objection by promising them 30 films a year, exclusive to theatres for 45 days and off streaming for 90, which converts AMC and Regal from opponents into supporters and gives regulators a settlement to bless.
The scoreboard: the gap between the share price and the deal price narrowed from about 20% to 15% as the stock went from $26 to $28. In arbitrage, a tightening spread is the market agreeing with you — the profit has been partly collected, and the remaining 15% is what is left for the remaining risk.
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In short: "Warner Brothers is at 69 billion" — cited in the incumbent-market-cap tally that measures what selling old shows to Netflix for "found money with 100% margins" ultimately cost the entertainment incumbents.
19:56Paramount is at a lowly 10 billion. Warner Brothers is at 69 billion. Yet not all is great at Netflix anymore. The company is very profitable, but growth is slowing and growth investors don't like investing in companies where growth is deteriorating. The upstart has grown old and that's why the stock is down 21% year to date. Finding a therapist is hard enough, but finding one who actually takes your insurance, that's where most online therapy platforms fall short.
In short: The trigger for Netflix's latest de-rating — "they first tried to buy Warner Brothers Discovery, which a lot of investors didn't like. They thought it signaled that Netflix is weak." Carlson's read: Netflix saw a content acquisition; the market read an engagement problem.
8:18The stock has actually continued to go downward this year, almost around 40%. So, it's given up a lot of the gains from its all-time highs. And why is that happening? Well, the reason that's happening is because there's now a new fear baked into Netflix's stock price. They first tried to buy Warner Brothers Discovery, which a lot of investors didn't like.
In short: Box-office whiplash under deal drama. Revenue −11% Y/Y to $8.7B (a $0.5B miss) though GAAP EPS of $0.06 beat by $0.16; adjusted EBITDA −6% cc to $1.9B, free cash flow $572M despite ~$350M of separation and transaction costs, ending net debt $29.7B at 3.4x leverage. The mix is now starkly two-speed. Streaming is the engine: revenue crossed $3B for the first time (+10% Y/Y) with adjusted EBITDA +75% to $512M and margin at nearly 17%, subscriber-related revenue accelerating, and management expecting 2027 to be its strongest content year yet on Harry Potter and returning HBO franchises. Studios is the drag: revenue −39% to $2.3B and adjusted EBITDA −89% to just $96M as Supergirl and The Bride! underperformed against last year's Minecraft/Sinners slate — management still has "0 doubts" about the long-term $3B EBITDA target and plans to ramp from 14 films this year to 19 in 2027. Linear is structurally shrinking: Global Networks revenue −17% to ~$4.0B with EBITDA −4% to $1.4B and advertising −27%, most of it the lost NBA rights; lower sports-rights costs cushioned profit but international advertising weakened and "visibility remains poor." The deal: cleared regulators in 66 jurisdictions including the EU and UK, but 12 US states are suing to block it with a federal trial set for March 2027; WBD is "highly confident" it closes and Paramount faces a $7B breakup fee if it fails. Bottom Line: HBO Max is scaling into a genuinely profitable streamer while Studios stay hit-driven and linear shrinks — "but none of that is the primary driver of the stock. The investment case now hinges increasingly on US antitrust risk, deal timing, and Paramount's willingness to see the transaction through."
Warner is really three businesses stapled together, and this quarter they moved in three different directions.
HBO Max, the streaming arm, is now the good one: revenue passed $3 billion in a quarter for the first time, and its operating profit jumped 75% to $512 million — a margin of nearly 17%, the best of the three big streamers. Management thinks 2027 will be its strongest content year ever, with Harry Potter and returning HBO shows.
The film studio is the bad one, and it is bad in a way that is normal for the business: revenue fell 39% and profit fell 89%, simply because this year's films (Supergirl, The Bride!) flopped against last year's hits. Management insists the long-run target of $3 billion of studio profit still stands, and its fix is to make more films — 14 this year, 19 planned for 2027 — so that no single flop dominates a year.
The cable networks are the shrinking one. Revenue fell 17% and advertising fell 27%, mostly because Warner lost the NBA. Losing expensive sports rights hurts revenue more than profit — you also stop paying for the rights — so profit only fell 4%. But management admitted it cannot see far ahead.
Here is the catch that makes this Neutral rather than Positive: almost none of the above is what moves the stock. Warner has agreed to be bought by Paramount. That deal has already been approved in 66 countries, but 12 US states are suing to stop it, and the American trial is not until March 2027. Until then, owning Warner is largely a bet on an antitrust verdict and on Paramount not walking away — Paramount would owe $7 billion if it does. Analysis, not a recommendation.
In short: The held arb improved on four August-6 headlines: UK CMA phase-1 clearance (the regulator citing competition from Universal, Disney and Sony), the UK Cultural Secretary declining to intervene on public-interest grounds — "one of the big risks is that UK is just more left-leaning… that was a big risk which is no longer a risk" — Q2 sales missing ~5% on the studio segment but EBITDA in line on cost cuts, and a formal letter from Regal Cinemas' CEO backing the merger, following an AMC op-ed; the two chains are ~40% of US theatre viewership and near 50% for blockbusters. Still one of the widest large-cap spreads: "the downside for Warner Brothers versus the upside and the probability of close, which we think is 70%, still makes that spread attractive."
This is a merger arbitrage: Warner Bros. Discovery has agreed to be bought, and its shares trade well below the agreed price because the market doubts the deal closes. The gap is the return if it does.
Four things improved in one day. Britain's competition regulator cleared it at the first stage, satisfied that Universal, Disney and Sony provide enough competition. Britain's Culture Secretary separately declined to block it on public-interest grounds — the political risk Singh worried about most, because UK ministers have historically been the ones to object. Quarterly profits came in as expected despite weaker sales, because costs were cut. And the chief executive of Regal Cinemas wrote formally in support, following an op-ed from AMC's boss — together roughly 40% of US cinema attendance, and nearly half for blockbusters.
He puts the chance of completion at 70%, and with one of the widest spreads left in large-cap deals, that still makes the risk-reward attractive.
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In short: The arb spread widened to ~$5.53/share (~21%) with the stock around $26, even as FCC Chair Brendan Carr expressed more conviction the Paramount Skydance deal closes. Singh's framing: "if it breaks, you go under 20; if it closes, you go above 30 — a one-to-one up-down type trade," so a little exposure, not a big position, but "if you believe the FCC chair… the spread is quite interesting."
Warner Bros. Discovery has agreed to be bought, but its shares trade well below the offer price because investors doubt regulators will approve it. That gap has widened to about $5.53 a share — a 21% return if the deal closes — even as the head of the FCC publicly said he expects approval.
Singh's arithmetic is deliberately unglamorous: below $20 if the deal breaks, above $30 if it closes, from $26 today. That's roughly a coin flip on payoff, so he holds a small position rather than a large one — the attraction is that the odds of closing look well above 50% while the spread is priced as if they aren't.
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In short: Q&A ("adding to Warner Brothers?"): "with the 15% spread, especially with the news this week, we'll be adding to it." The merger-arb spread widened back out enough to scale the position.
The Warner Bros. takeover arbitrage is still open, and the gap between the current share price and the agreed deal price is back out to about 15%. That's a large payoff if the deal closes, and after this week's news Singh is adding to it rather than trimming. A deal-completion bet, not a bet on the media business.
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In short: Merger-arb update: +2% Tue after 12 state AGs sued to block the Paramount deal — a relief because the complaint held "very few surprises" (a 30% top-grossing-film share; top-4 studios → 93% post-merger). At $27, WBD prices ~75% completion odds off a mid-teens standalone. Next: EC phase-one (Jul 22), UK CMA (Aug 7, "the most risky"), UK culture-secretary intervention.
A merger-arbitrage situation: Warner Bros. is being bought (the Paramount deal) and the stock trades below the deal price. This week 12 state attorneys general sued to block it on antitrust grounds — but the stock actually rose 2% because the lawsuit contained "very few surprises," so investors had feared worse. At $27 the market is pricing about a 75% chance the deal closes. The remaining hurdles to watch are European and UK regulators (the UK is "the most risky").
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In short: The deal Netflix walked away from last quarter — avoiding an expensive bidding war and collecting a $2.8B breakup fee, but also removing "a potential shortcut to the next phase of growth." Netflix must now generate that growth internally through price, advertising, live programming and content variety. The termination also cost cash in the quarter: Q2 FCF fell to $1.5B from $2.3B largely on cash taxes tied to the Warner termination fee. (Referenced; not a stance call.)
Warner Bros. Discovery is the studio and cable group behind HBO, CNN and the Warner film library. Netflix had been circling it and walked away last quarter rather than get dragged into a bidding war — pocketing a $2.8 billion break-up fee (the penalty a would-be buyer collects when a deal it had rights to falls apart).
Financially that was a win; strategically it closed a door. Buying Warner would have been a shortcut to more content, more sport and more subscribers. Without it, every bit of Netflix's next leg of growth has to be built in-house — higher prices, more advertising, live events, new formats. The fee even came with a cash cost: taxes on it are the main reason Netflix's quarterly free cash flow dropped from $2.3 billion to $1.5 billion. Referenced in passing, not a stance call.
In short: Context in the Netflix debate: Netflix's rumored Warner Bros. acquisition — the desk's read was that Netflix not getting the asset was better for Netflix stock (it jumped on the news, then faded). No committee stance on WBD itself.
In short: The target of Paramount's $110B deal that the 12-state antitrust suit seeks to block (news). No committee stance.
In short: The target of Paramount's ~$110B merger and the object of the 12-state antitrust suit; also referenced as the company Netflix "tried to buy… and opted out of the deal." Carlson expects the merger to clear the state challenge.
21:45To summarize their arguments, and we could go into it. We have the whole thing here. It's 100 pages plus long. But if we look at the key points of it, it's the type of things you would expect. They outline first and foremost that unlike Netflix, which had no box office business, Paramount already has one.
In short: A "fat" 15-20% merger-arb spread on the Paramount ("Peace Sky") deal — state AGs (Oregon's requesting a 60-day delay + Monday injunction hearing) may sue; WBD at $26.59 with consensus downside only ~$25-26 (~5-6%) if a lawsuit lands. Peace Sky committed not to close before July 22 (= EC phase-one deadline); final ruling likely Q1 2027.
This is a merger-arbitrage play: Warner Bros. is being bought (in the "Peace Sky"/Paramount deal), and the stock trades below the deal price, leaving a fat 15-20% gap you'd earn if it closes. The gap is wide because state attorneys general may sue to block it on antitrust grounds. The appeal is the limited downside: if a lawsuit tanks it, consensus says WBD falls to about $25-26 — and it already trades at $26.59, so you're risking only ~5-6% to make ~20%. The catch is time: a final ruling may not come until early 2027.
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In short: Merger-arb update (a held position): the FT reported the EU is set to clear Paramount/Skydance's acquisition "provided the company accepts certain remedies" — including Sky possibly exiting its Universal Pictures International JV. A constructive step toward closing.
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In short: Referenced as a prior Netflix content-acquisition target ("they went after Warner") in the Netflix/content discussion. No direct stance.
In short: Referenced — Netflix's bid for WBD's library, which it called "a nice-to-have, but not need-to-have"; the first item cited as supposed evidence Netflix is "desperate" (a narrative Carlson rejects).
8:39One of them is Netflix has given investors the impression that it is in desperate need of an acquisition to buy another company and to bolster their content library. The first big obvious sign of this was them bidding on Warner Bros. Discovery. Netflix described it as a nice-to-have, but not need-to-have.
In short: Referenced as the M&A target Netflix lost; Link liked Netflix not getting it — no direct stance on WBD itself.
In short: The widest-spread arb he finds "quite attractive": a WSJ report (June 15) says DOJ staff lean toward suing to block the studio combination as anti-competitive — reversing the earlier "investigation closed" read. Assumes clearance after some divestitures.
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In short: Arb spread widened to ~14% intraday then recovered to ~$27: a Hollywood Reporter story has a trial lawyer in talks to represent California + a state-AG coalition. Cleared many foreign regulators; the EU opened its review June 9 with a Phase-1 deadline July 14 — the key catalyst.
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In short: The biggest merger spread on the board: the Ellison-funded Paramount-Skydance cash bid leaves a ~$4 (~15%) spread pending antitrust — should compress over the next year if it clears.
Warner Bros. is being bought by Paramount-Skydance with cash backed by Larry Ellison. The stock trades about $4 (roughly 15%) below the deal price because regulators haven't approved it yet — the widest big-company merger spread on the board.
For an arbitrageur that gap is the product: if antitrust clears the deal over the next year, the stock rises to the deal price and the 15% is collected. The risk is the deal being blocked, which is why the discount exists.
57:17U, and that's just a flavor of names that we're looking at. And the biggest spreads in the market right now are, WBDP Sky, which is going through antitrust right now. You're you guys are very familiar with Larry Ellison funding, this Peace Guy bid for Warner Brothers.
In short: Referenced — its cancelled sale to Netflix (Netflix kept a $2.8B breakup fee) is why he revisits the Netflix setup.
13:36The deal didn't go through and the stock price raced back up after the deal was cancelled. Netflix got this big payout of $2.8 billion in cash for the cancellation prize and then they moved on. Investors seem happy. The stock raised up above $100 per share and then without really any reason at all, the stock went back down to $82 per share. The PE ratio is only 26.
In short: Merger-arb — bought "a little" on a wide ~14% spread (the #2 most attractive large-cap spread). The EC has opened a formal review of the WBD / Paramount-Skydance deal; phase-one deadline July 7 is the next catalyst. Wide spread = real regulatory break risk priced in.
Warner Bros. Discovery is the media giant behind HBO, CNN, the Warner movie studio and Discovery's TV networks. It has agreed to merge with Paramount-Skydance.
This is a "merger-arbitrage" bet: buy the stock now at a discount to the agreed deal price and pocket the gap when the deal closes. That gap is unusually wide (~14%), because there's real risk regulators block it — European Union antitrust officials have opened a formal review, with a first decision due July 7. The wide discount is the market's way of pricing in that break risk; the house bought a little.
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